The rise in popularity of so-called "netbooks" has presented Apple with a dilemma: to build one or not to. Previously Steve Jobs said that Apple did have an offering in the UMPC segment: the iPhone/iPod Touch. Apple has also said it can't build anything of quality for under $500, the sweet spot for netbooks. 

Yet for months there have been rumors that Apple is building something that would sit between the iPhone and a conventional laptop. Now these rumors have reached a kind of fever pitch. From today's Dow Jones newswires:

Apple Inc. is planning to launch a netbook computer with a touch screen monitor as early as the second half of this year, two people close to the situation told Dow Jones Newswires Tuesday.

The mini laptop computers will likely have monitor screens that are between 9.7-inches and 10-inches, one person, who declined to be named, said.

Another person said other specifications and functions are still under evaluation.

Apple is working with Taiwan's Wintek Corp., a contract manufacturer of small and medium displays, and Quanta Computer Inc., the world's largest notebook maker by revenue, to assemble the new netbooks, the second person said.

Assuming some version of this is true Apple has a tricky path to navigate. Its laptop sales and pricing have held up well compared to the rest of the industry. The iPod Touch is selling well. If it introduces a less than full functioning computer, say a big iPod Touch, will that affect sales of laptops, Touches, both? Still Apple probably can't ignore the segment.

One of the emerging trends with netbooks is to treat them like mobile phones: heavily subsidize the hardware and sell connectivity in the form of a two year contract. This is happening both in the US and the UK with Acer and AT&T and O2/Telefonica. (For its part the Amazon Kindle is missing a huge opportunity as a media player and Internet access device.)

If Apple were to release a small tablet computer would connectivity be part of the package, or be easily available? Would it work with iPhone apps? Would it be positioned as a mobile Internet access device or a more portable laptop replacement or both? Pricing is also critical. The high price point of the thin MacBook Air dramatically limited its audience of potential buyers.

These are not  easy questions to answer but the right device, priced correctly, with some sort of path to Internet access on the go could be another giant hit for Apple. 

We'll see how much of any of this is real.

____

Related: Reuters seems to confirm that some new tablet-like product is coming from Apple.